While we are very far gone at the moment as a society, never forget there are millions of people out there fighting for what is right and we will succeed in ushering in a new and more positive era for life on earth. These 11 minutes are well worth your time.
In the pre-market this morning, Gold had outperformed the S&P 500 by over 200bps for the month. By the close today (month-end settlement T-3) - given how synchronized gold and stocks have become - Gold and the S&P 500 will be perfectly unchanged for the month. Whether this morning's plunge in Gold (and rip in stocks) was the unwind of a major hedged position (or vice versa) is unclear - but the coincident reaction around the election suggests today's Gold move (and stock move) had a lot to do with each other - no matter how much they are blamed on cliff schizophrenia...
"A great civilization is not conquered from without, until it has destroyed itself from within. The essential causes of Rome's decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars." A number of sources list this as a quote, but it is a synthesis of the Epilogue "Why Rome Fell". It is valid then as well as now. America as we know it won't collapse, but Americans have been unusually successful in dealing with "bureaucratic despotism". They will be successful again. Bankruptcy of another experiment in bureaucratic despotism will prompt a refreshing turn to reform of bullying politics. What we have now is an 'Ineptocracy'.
Bankers in London, Europe's trading hub, are bracing themselves for significantly lower bonuses (and salary cuts) especially so relative to their New York counterparts. As Bloomberg Businessweek notes in the brief clip below, investment bankers and traders should expect a 15% pay cut compared to unchanged in the US and while hope is that these are temporary, many believe this shift is structural and reflects "US regulators [not having] the same obsession with pay structures that European regulators have." As is evident from the chart below, there are winners and losers (and we bet you can guess who the winner is).
While Nassim Taleb sees Switzerland as the poster-child for what Europe should become, the quote above from SNB's Jordan begs the question - which scenario does include the Euro Collapse (and remember, as he tells us, the Franc cap is 'not' currency manipulation).
On November 16, and again today, one person boldly went where so many have gone before, and made sure that Nancy Pelosi's alleged SPY calls don't expire worthless, and by uttering a few words widely misinterpreted by the headline scanning, market-making algos both then, and today, preserved all confidence in the centrally-planned monetary policy farce formerly known as "the market." Who is this unmasked crusader against the evils of efficient markets, and for the unquestioned glory of authoritarian Economist PhD's in charge of the Fed's trading desk? This man:
There are 1.1 government dependents for every full-time worker in the U.S. In our analysis, there has been a Grand Bargain reached by the 3.5 classes in the U.S. The Grand Bargain was this: we at the top will pay significant taxes as long as we get to control the levers of financial and political power. We in the top 19% will pay much of the taxes as long as we and our children can continue to live well and accumulate wealth. We in the "middle class" will continue to work hard as long as we have hope of bettering our lifestyle and the lives of our children. We in the bottom 50% and retirees agree not to threaten the top .5%'s power and the wealth of the top 19% as long as we can get by on our government transfers. This Grand Bargain is now fraying as the promises made to everyone cannot possibly be met. That which is unsustainable will be replaced by another more sustainable arrangement. It's a partnership of "Tyranny of the Majority" and "entrenched incumbents Elites."
Reid's sell-off has been entirely retraced by a Boehner-Obama double-act in which they didn't spit, scratch, and gnaw at each other. The algos have it now and so stop-runs in stocks are all that counts. Equities are in a world of their own as they decouple from everything from high yield credit to Treasuries and from oil to the USD. Correlations have dropped as we approach Reid's top - we wonder if reality will sink back in shortly. It would seem, once again, that EURUSD is the most-leveragable vehicle of the day once again... and of course this ramp enabled AAPL to get back to yesterday's VWAP.
Bank of Japan Posts Whopping ¥233 Billion Loss As Its Soaring Balance Sheet Hits Record ¥156 TrillionSubmitted by Tyler Durden on 11/28/2012 13:38 -0400
But, but, a central bank can never lose money. Bzzzz, wrong. As it just so happens, the world's most tragicomic farce of a central bank, and one which is about to officially lost its (faux) "independence" and become a branch of the Japanese government if the up and coming PM Abe has his way, the Bank of Japan, just reported that in the quarter ended September 30, the Japanese central bank reported an operating loss of ¥183.4 billion, and a net loss of ¥232.9 billion. As a comparison, the loss in the same period in 2011 was "only" 91 billion. This is a harbinger of the total collapse that is the utterly meaningless capital tranche of all central banks will go through before the terminal phase of the global Keynesian experiment is finally completed. But in the meantime, enjoy this chart of the Bank of Japan's balance sheet returning back to a record ¥156... trillion.
In a few minutes - and only a few minutes late - our leader will opine on the topic du jour. While Reid's voice shuddered risk-takers, and Boehner's was perfectly pitched to get the algos juices flowing - we wonder what effect Obama's dulcet tones will have on a now-happy equity market, and if the second-term president is once again merely a catalyst to sell.
Europe was looking a little dark this morning; EURUSD was sliding, sovereign bonds flat-to-wider, and European stocks and credit were at one week lows. Then Speak Boehner opened his mouth and the correlated world of systemic cliff-on / cliff-off jumped to life and saved the day for all asunder. EURUSD remains down on the day as GGBs lose some hope, credit remains an underperformer but the jerk higher in stocks into the close was just remarkable in its idiocy. The equity move looks far out of line to the rest of risk assets for now...
While the common wisdom, espoused by any and all commission-taking wealth manager looking to up his AUM, is that Black Friday sales (and the anecdotal evidence from self-referential store-owners and CEOs) can tell us about the trend in the economy or they offer some divine extrapolated insight into the year's final sales number. The truth; you can't handle the truth. As BofAML's Michelle Meyer notes, there is no correlation between total holiday sales and Black Friday sales over the past seven years. In fact, we believe that not only are the early estimates of Black Friday sales insignificant, they can send misleading signals. More fundamentally, Black Friday sales can either signal a healthy consumer or a desperate one, depending on the state of the economy. The bottom line is that we advise fading the Black Friday sales reports, but paying attention to the aggregate holiday sales reports.
Just 12 days ago (before the cone of silence began), we saw the beginning of the Boehner bounce as the speaker spaketh and the market obeyeth. Headline-chasing algos know only one thing it appears, when Democrats speak, sell; when Republicans speak, buy... oh how we love these efficient markets...
There are those who may be surprised that last month's number of Seasonally Adjusted New Home Sales, which was then reported at 389K, and which number hit the airwaves days before the Obama reelection, was the highest since April 2010. We are not among them, as we were fully expecting today's number to be a major revision of the September number lower - as just happened, with the whopper of a print revised far lower to 369K - but doubled down with the additional miss of expectations of Seasonally Adjusted annualized new home sales of 390K for October when in reality only 368K were sold. All these numbers are annualized. When observed on an as is basis, in October there was a grand total of 29,000 new homes sold in the entire USA, with the Northeast representing a whopping... 2,000 of this. Oh and of the 29,000 houses sold, 9,000 were not even started. And finally, for those who enjoy pointing out the rise in home prices driven only and exclusively by foreclosure inventory stuffing and removal of all such real estate from the open markets, both the median and average new home price ($237,700 and $278,900) printed at at the lowest since June. Oh wait, we know: Sandy's fault. Which explains all bad data. When the data is good, it is nobody's fault.
Greece and the grand machinations of the European Union came to mind as it occurred to me that all of the fine points aside; Greece had become a ward of the State. The math doesn’t even add up so it can be said that it was a poor attempt at hide-and-seek but we suppose it was the best they could do given their skill-set these days. As you watch the antics of the politicians in Spain you realize that they are first cousins to the Greeks. Prime Minister Rajoy and his merry band of henchmen are playing the same tunes as we have all heard before. The reasons that Spain has not come begging for alms yet is not too complicated. They don’t want to be audited by the Troika, God forbid, they want no one peering at the actual state of their Real Estate market, they don’t want anyone but paid flunkies examining their banks. The ECB will save the world subject to the decisions of Europe’s political leaders. Saving the world is a good thing and keeps getting promised by virtually every religious leader for the past several thousand years; the second Spanish Inquisition is about to begin and the zealot may be found wanting.